Stock management Models/ROC and ROL Flashcards
What is the reorder interval?
Th regular time period at which inventory is reviewed to determine
There are two different types of stock management systems, which are those?
- Continuous review systems: continuous check of inventory after each withdrawal
- more expensive, but good to always know inventory status
- Periodic review system: periodic check at fixed time period
- cheaper, but bigger risks of stockout since the inventory level isn’t controlled as regularly
What is the reorder interval T?
For periodic review systems: regular time period at which inventory is reviewed to determine whether new stock should be ordered.
What is reorder level?
When stock falls below a certain reorder level (ROP) a new order is issued
How can risk of stockout be avoided?
Use of safety stock and continuous checks of inventory
It can be difficult to determine the stockout cost? How can that be done?
Use probabilistic model and assume that demand is normally distributed
With the help of mean and standard deviation and determine the ROP and the safety stock
What is Single Period inventory model? What are the challenges?
Items that cannot be held over and used as inventory in the next salesperiod
Ex. Bakery goods, newspapers, Christmas trees
Challenge: Critical decision is how much to order at the beginning of the period: 50% risk of stockout and 50% risk of leftover
What are ROL methods? What items are suitable for these types of methods?
Reorder Level methods. Continuous inventory review system controlled by inventory level.
- A new order is carried out when ROP is reached
- Suitable for A category items, dvs important products for the company
What are ROC methods? What items are suitable for these types of methods?
Reorder Cycle methods. Stock revision is periodic and performed after fixed time periods.
- Suitable for orders with limited holding costs and high uncertainty: ex. full load shipments that are placed at fixed time intervals
There are different types of ROC systems, can you tell me about those? Also write down the corresponding formulas on paper
- ROP-approach:
- Fixed Q, fixed time period R: if under the ROP at inventory check at the end of time period, a new order with set quantity is issued - Max-approach
- Fixed time period R: When the control is performed, enough items are ordered to raise the quantity to the maximum inventory level - Min-max approach
- When the controls performed and the stock us under ROP, a new order is issued that raises the stock to its maximum level
There are different types of ROC systems, can you tell me about those? Also write down the corresponding formulas on paper
- 2 bin-system/ROP system: When inventory goes below ROP, a new order of a fixed quantity is triggered
- quite simple, and easy for supplier to predict demand - Min-max approach: When inventory goes below ROP, an order is issued that raises the inventory its maximum level
- simple, but suppliers risks making error due to unpredictable demand